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Economics Commentary

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Introduction

Economics Commentary Number: SL Number 1 Title of extract: "Minimum pricing on alcohol urged" Source of extract: BBC News http://news.bbc.co.uk/go/pr/fr/-/2/hi/uk_news/scotland/8111643.stm Date of extract: June 22, 2009 Word Count: 733 Date the commentary was written: July 5, 2009 Sections of the syllabus to which the commentary relates: 2.1, 2.2, 2.4 Candidate name: Chandni Shah Candidate number:002605 Minimum pricing on alcohol urged Scotland should become one of the first countries to introduce minimum pricing for alcohol, it has been urged. An alcohol summit in Edinburgh discussed the scale of the country's alcohol problem and possible solutions. The forum brought together about 100 representatives from across the political spectrum, the alcohol industry and interest groups. A World Health Organisation expert urged Scotland to lead the world in pricing policy. The event comes in the wake of the Scottish Government's publication of its Alcohol Framework in March. Dr Harry Burns, Scotland's chief medical officer, who attended the summit, said: "The health profession is seeing the fall-out of alcohol misuse every year in hundreds of thousands of GP consultations, thousands of hospital admissions and increased rates of chronic illness and deaths. ALCOHOL MISUSE IN SCOTLAND ? 2007-08: 42,430 alcohol related discharges from hospitals ? 2008: 49% of all Scottish prisoners said they were drunk at the time of their offence ? ...read more.

Middle

Labour's Cathy Jamieson said her party wanted to see measures which get to the heart of Scotland's drinking. She said: "We need a national consensus to tackle Scotland's hard drinking culture and I am pleased that the Scottish Government agreed to Labour's request for an all-party summit on alcohol abuse. "Labour has put forward proposals for a ban on billboards advertising alcohol near schools and a mandatory code of practice for retailers, but we will look seriously at any credible proposals that will reduce the level of problem drinking in Scotland." The Liberal Democrats said minimum pricing would not tackle deprivation levels that are at the heart of the challenge of alcohol abuse, while the Conservatives also said no pricing plan would make a significant difference without understanding why people drink to excess. Story from BBC NEWS: http://news.bbc.co.uk/go/pr/fr/-/2/hi/uk_news/scotland/8111643.stm Published: 2009/06/22 16:45:49 GMT (c) BBC MMIX The article is about the government of Scotland planning to put a minimum price on alcohol in the country. It has been brought to the notice of the government that majority of crimes are caused due to alcohol and there has also been many other kinds of misuse. They feel that putting a minimum price on alcohol would help decrease the sales and help strengthen the economy more by decreasing the amount of problems caused by it. ...read more.

Conclusion

Positive externality is when the marginal social benefits outweigh the marginal social costs and the private benefits.3 Alcohol is a negative externality for the economy. Negative externality results to a market failure because the marginal social cost is more than the marginal social benefit and the private cost4. Both result in market failure. Private cost is the cost or input of a private firm. Marginal Social Benefit is the benefit the society receives from alcohol and marginal social cost is the cost that the society pays for alcohol for example crimes that are caused by alcohol. The burden and cost of the consumption negative externality is held by a third party. The cost and burden of consumption of alcohol is held by the society; in this case, the burden and cost is the amount of crime and illness in the society. In a few years, it could affect the whole population more. As it is stated previously, putting a minimum price on alcohol may limit sales since it may have an inelastic price elasticity of demand. It could be good for the economy if less people consume alcohol since it is a negative externality and it affects the society in many ways. It will also result to an excess of supply of alcohol since consumers' demand may lower due to the sudden increased price. 1 GraphA 2 GraphB 3 GraphC 4 GraphD ?? ?? ?? ?? Page 1 of 5 ...read more.

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